Data flow disasters can sting

Doyle Lonnegan, a ruthless New York gangster turned banker, is one of my favourite movie characters.

In ‘The Sting’, which is set in the 1930s, Lonnegan, (the brilliant Robert Shaw), is the victim of a sophisticated confidence trick which costs him the $500,000 he bet on a horse.

A con-artist convinces him he can delay the official results of races getting to the bookmakers. He says he does this via an ‘inside man’ in the Western Union Telegraph Company. After receiving results from around the USA, the insider tips-off his partner by phone, so that guaranteed winning bets are placed before he transmits the information on to the bookies.

Lonnegan is steered towards taking the phone-calls and, eventually, to making the huge bet in a bookie that is secretly run by the conmen. There is a ‘mix-up’ about which bet should have been made, and the horse loses. As he realises he has lost his money (but not that he has been conned) a potentially scandalous situation is created which forces him to leave the premises before the cops arrive.

The conmen and their associates then divide the loot and get ready to make a sharp exit.

As I watched the film last weekend it occurred to me that what ‘hooked’ Lonnegan was the realisation that a ‘data flow disaster’ was bad for the bookie and potentially very lucrative for him.

Here at OBASHI, a data flow disaster is the term we use for an event where a flow of data is interrupted or compromised, so that there is a negative business impact on those who use or interact with that flow of data.

For example it could cause a physical or mechanical event to happen or not happen when appropriate, like a fire-alarm sprinkler system failing. Or it could be a breach in cybersecurity when unauthorised people get remote access to confidential information held in IT systems.

Or it could be when a ‘flash crash’ happens. This is when the value of a stock, or something else that is traded on the financial markets, falls suddenly for no obvious reason, only to quickly recover and quickly rebound.

Financial markets are becoming ever more complex, with traditional institutions, day-traders and new exchanges swopping billions of data flows per day. But without any standards for dataflow it doesn’t take much for problems to arise, and for fortunes to be quickly made or lost.

Here is a short video which, when viewed full screen, shows the data values changing in real-time during the recent ‘bitcoin’ crash, caused by a hacker using a compromised account.

“...the futures markets, the options markets and the equities markets were interacting at high speed. All it takes to cause chaos under these conditions is for a single data feed somewhere in the complex matrix to be compromised or to stop flowing for some time...”

Despite attempts by the authorities to minimise large price fluctuations in financial markets, by introducing ‘circuit breakers’, it seems that flash crashes are likely to continue.

Perhaps it’s just that, ‘extreme volatility is the trade-off for fast electronic markets, and it’s up to investors to know how to protect themselves.’

Personally, I do my best to follow Warren Buffet: “Always invest for the long term”.